In a major deal for India's private defence industry, Anil Ambani-led Reliance Group and Rafale maker Dassault Aviation today announced a joint venture (JV) that will be a "key player" in execution of offset contract worth about Rs 22,000 crore as part of the fighter jet deal.
India has been pushing for defence manufacturing under Prime Minister Narendra Modi’s flagship ‘Make in India’ programme. India, the largest defence exporter of the world, requires foreign defence companies to invest a part of deal amount in the country to cut out its imports.
The announcement of the JV, Dassault Reliance Aerospace, comes within days of India and France signing an agreement for 36 Rafale fighter jets at a value of euro 7.87 billion, or about Rs 59,000 crore, on September 23.
The agreement includes a 50 per cent offset obligation, the largest-ever offset contract in the history of India.
The major highlight of the offset agreement is that 74 per cent of it has to be imported from India, which means direct business worth around Rs 22,000 crore.
The offset, spread over seven years, is expected to be finalised soon.
There is also a technology-sharing component, which is being discussed with the Defence Research and Development Organisation (DRDO).
Other companies involved in the Rafale deal include French firms MBDA and Thales, besides Safran, which too will be part of the overall offset obligation.
The Dassault Reliance Aerospace joint venture will be a key player in the execution of offset obligations, a joint statement by the companies said.
The development has come as a boost to the Reliance Group, which entered the defence sector only in January 2015.
"This new joint venture called Dassault Reliance Aerospace will support Prime Minister Modi's Make in India and Skill India policies and develop major Indian programmes with high levels of technology transfer to benefit the entire aerospace sector," it added.
The proposed strategic partnership between Dassault and Reliance will also focus on promoting research and development projects under the IDDM programme (Indigenously Designed, Developed and Manufactured), a new initiative of Defence Minister Manohar Parrikar.
"The formation of this joint venture with Reliance Aerospace led by Anil Ambani's Reliance Group illustrates our strong commitment to establish ourselves in India and develop strategic industrial partnerships under the Make in India policy promoted by the Indian government," Eric Trappier, Dassault Aviation Chairman and CEO said.
"We are delighted to partner a world leader in aviation like Dassault Aviation. This is a transformational moment for the Indian aerospace sector and Reliance Infrastructure's subsidiary Reliance Aerospace," said Anil Ambani, Chairman of the Reliance Group.
Anil Ambani plans to turn Reliance into a major defence firm in coming years and the joint venture is seen as the step in that direction.
Reliance hopes to build a manufacturing unit in Nagpur to feed into Dassault's supply chain and hopes to build on the future defence demands of the government.
Several Indian firms like Tata Group, Mahindra Group and Larsen & Toubro Ltd. have also shown interest in manufacturing defence equipment in India.
According to a report by The Wire, three companies - Bharat Electronics, Noida-based Samtel and Reliance Defence Systems - were in talks with Dassault and the Indian government for co-production opportunities that would arise from the Rafale deal.
While Bharat Electronics, Samtel and other defence companies will also get a piece of the offset money under the Rafale deal, Reliance Defence will execute the major portion of the project, the report said, citing sources.
